Piedmont Lithium moves to floating price deal with Tesla

The change in the supply agreement between the miner and the carmaker, also based in the US, is in line with a shift seen in recent years.

The lithium market has historically been dominated by long-term contracts based on a fixed price negotiated between seller and buyer. But the uptrend in prices over recent years, alongside the unpredictability of future lithium prices, has prompted a shift along the lithium value chain to a pricing mechanism based on more transparent and up-to-date supply-demand dynamics.

Piedmont Lithium will now supply Tesla with an increased volume of 125,000 tonnes of SC6, a high-purity spodumene concentrate suitable for lithium-ion batteries, from the second half of this year until the end of 2025.

According to the updated terms of the agreement, “the SC6 pricing will be determined by a formula-based mechanism linked to average market prices for lithium hydroxide monohydrate throughout the term of the agreement,” Piedmont Lithium said.

“The pricing received by Piedmont under the agreement with Tesla will be determined by market prices at the time of each shipment,” it added.

Mineral for Tesla will now be sourced from Sayona Mining’s North American Lithium project in Quebec, Canada. It was originally to come from Piedmont’s North Carolina project, but that is still in the pre-permitting stage.

Spodumene is the hard-rock mineral that contains lithium, and is a key input for the production of lithium-ion batteries for EVs.

The uptrend in spodumene prices has been tracking the surge in downstream lithium chemical prices since 2021. The ultralight metal has entered a new bullish cycle, supported by high demand for EV batteries.

This supported a price uptrend across the whole lithium industry, including technical grades, battery grades and spodumene concentrate feedstock.

But these gains seem to have slowed in recent months. Chinese lithium prices have been on a downward trend since the beginning of December 2022. Given that China’s EV production slowed during November last year, the demand for upstream lithium salts has also cooled, market participants said.

Fastmarkets’ fortnightly price assessment for spodumene, min 6% Li2O, spot price, cif China, was $8,000-8,299 per tonne on December 22, down by 1.67 % from two weeks earlier, but up by 225.98% from $2,400-2,600 per tonne on January 6, 2022.

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